Claire’s and The Original Factory Shop near collapse, putting 2,550 jobs at risk

The retailers Claire’s and The Original Factory Shop are on the brink of administration, putting 2,550 jobs at risk.Both chains are owned by Modella Capital, a private equity firm, which recently bought the high street arm of WH Smith – renamed TG Jones. Modella said in a statement that the climate on UK high streets was “extremely challenging” and data suggested “an alarming drop-off in pre-Christmas footfall”.It said administration was the “only option” for both Claire’s and The Original Factory Shop, and it had started insolvency proceedings for both chains.The investment group has 154 Claire’s stores after buying about half the UK chain from administrators in September last year. It is understood that the advisory firm Kroll is lined up to handle the proposed administration, which would affect about 1,350 jobs at the accessories and ear-piercing chain.The 140-store cut-price homewares chain The Original Factory Shop, which was bought by Modella less than a year ago from the private equity group Duke Street Capital, has filed a notice with the high court to appoint administrators. About 1,200 jobs are at risk.The move, under which the advisory firm Interpath would be appointed, gives the company 10 days’ protection from creditors while negotiations on its future continue.Modella said on Monday: “This has been a very tough decision. We have worked intensively in an effort to save both businesses, having made last-ditch attempts to rescue them, but neither has a realistic possibility of trading profitably again.“A combination of very weak consumer confidence, highly adverse government fiscal policies and continued cost inflation is causing many established and much-loved businesses to suffer badly.”The likely administration comes only six months after a restructure under which The Original Factory Shop’s head office and distribution centre shifted from Burnley to Bolton and it agreed rent cuts on a number of stores.The company has been struggling for some time and made a £5.6m pre-tax loss in the year to 31 March 2024 as sales slid 1% to £117.5m despite high inflation in 2023 and into 2024.Modella snapped up Hobbycraft in August 2024 and closed a number of outlets in a restructure last spring.The decision to call in administrators at Claire’s and The Original Factory Shop, first reported by Sky News, emerged just days after the small upmarket fashion chain LK Bennett filed an application with the high court to appoint an administrator to the business, which employs about 280 staff.Retailers are facing higher costs and a tough consumer environment as household budgets have come under pressure from higher energy and food bills, while concerns about the economic and global political environment have prompted those with spare cash to increase their savings.A warm autumn and start to the winter has also affected fashion retailers in the UK with the latest Worldpanel by Numerator UK clothing survey, previously known as Kantar, indicating fashion sales fell 1.4% in the four weeks to 7 December.This week the leading UK fashion retailers Next and Marks & Spencer will reveal how they have fared. Their superior online service teamed with a large chain of high street outlets mean they are likely to have taken share in a tough market.